stocks-of-boeing-and-its-suppliers-fall-on-reports-of-737-max-production-halt

Stocks of Boeing and its suppliers fall on reports of 737 MAX production halt

Business

(Reuters) – Shares of Boeing (BA.N) and its suppliers fell on Monday after reports that the U.S. planemaker could temporarily halt production of 737 MAX aircraft, potentially adding to billions of dollars in costs, as its return to service is pushed to 2020.

The best-selling Boeing plane has been grounded since March after two fatal crashes in Indonesia and Ethiopia killed 346 people, costing the plane manufacturer more than $9 billion in charges so far.

Boeing’s shares fell 4% in premarket trading to $328.13, while Spirit AeroSystems Holdings Inc (SPR.N) fell 3.4%. Spirit is Boeing’s biggest supplier and makes the MAX fuselage along with other parts such as pylons.

Analysts say a suspension of MAX production would likely result in significant additional charges for Boeing as well as it main suppliers, who have been shielded from a financial hit as they have continued to sell parts for the jet at a rate of up to 52 units per month, even as the planemaker has cut its own production to 42 per month.

“We would highlight Spirit AeroSystems, Safran SA (SAF.PA) and Senior Plc (SNR.L) as names that could potentially experience greater disruption impacts if production is indeed slowed further or halted,” Berenberg analyst Andrew Gollan said.

Two suppliers told Reuters on Monday that Boeing was likely to halt assembly of the 737 MAX jet for the time being, though some suppliers could be asked to keep producing to minimize disruption.

CFM International, a joint venture between Safran and General Electric Co (GE.N) supplies engines to the MAX. Safran fell 1.5%, while shares of GE were up 0.5%.

Shares of British engineering firm Senior Plc were also up 2%. The company makes a wide variety of aircraft components and counts Boeing as one of its top customers.

The largest U.S. planemaker’s board of directors is holding a two-day meeting in Chicago, which started on Sunday, to consider 737 MAX production changes, Reuters reported citing a person briefed on the matter.

Boeing could make an announcement on production plans as soon as late Monday, and this follows the U.S. Federal Aviation Administration comments last week that it would not approve the plane’s return to service before 2020.

Reporting by Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta